In recent years, with economic uncertainty and market volatility, many investors have turned to alternative assets like gold and commodities for portfolio diversification. Sandstorm Gold is a Canada-based metals streaming company that provides an intriguing way to invest in gold and other metals. In this article, we will take an in-depth look at Sandstorm Gold, analyzing its business model, financial performance, growth prospects and risks to evaluate whether it represents a good investment opportunity for investors looking to add gold exposure. Key factors like its streaming agreements, low-cost production base, strong cash flows and growth pipeline will be assessed to determine if Sandstorm Gold offers an attractive risk-reward profile for investors seeking gold investments.
Sandstorm Gold’s unique streaming business model provides leveraged exposure to gold
Sandstorm Gold uses a metals streaming business model, in which it provides upfront payments to mining companies in exchange for the right to purchase a portion of their future metal production at fixed prices. This gives Sandstorm leveraged exposure to underlying commodity prices. As mines ramp up production over time, Sandstorm benefits from increasing output volumes and fixed purchase prices. The streaming model also means Sandstorm avoids common mining risks like building and operating mines. With diversified streams on over 200 assets globally, Sandstorm gets broad commodity exposure without operational risks.
Strong cash flows and growth pipeline support Sandstorm’s robust performance
Sandstorm has delivered strong financial performance in recent years. With operating cash flows jumping from $13 million in 2015 to $114 million in 2021, Sandstorm has funded significant growth. Revenue has climbed steadily from $47 million to $71 million from 2017-2021. Despite some asset impairments, net income rebounded from a 2016 loss to reach $27 million in 2021. Sandstorm has over $50 million in cash and $240 million in available capital to fund a development pipeline exceeding $500 million. This financial strength and internal growth should continue driving cash flow and EPS higher.
Diversified streams provide exposure to multiple metals
While gold accounts for over 60% of Sandstorm’s revenue, the company also holds streams on copper, silver, palladium and zinc assets. This diversification reduces Sandstorm’s dependence on gold prices alone. As the global economy transitions toward clean energy, Sandstorm’s copper and zinc streams should benefit from rising industrial metal demand. The diversified commodity exposure spreads risk and allows Sandstorm to benefit from wider metal price appreciation.
Geographical diversification balances risk profile
Sandstorm’s streaming agreements are geographically diversified across stable mining jurisdictions in the Americas, Australia, Africa and Europe. This mitigates concentration risk and political risk relative to miners focused on single geographies. Sandstorm’s deals are focused on low-cost assets with exploration upside, further enhancing the attractiveness of its risk-return profile for investors.
In summary, Sandstorm Gold provides investors with clear advantages like commodity leverage, geographical diversification, and avoidance of common mining risks. With strong cash flows, a solid project pipeline and upside exposure to multiple metals, Sandstorm offers an appealing way for investors to gain exposure to gold and other metals. For investors seeking portfolio exposure to gold with lower volatility than mining equities, Sandstorm deserves strong consideration.